(,] 



alendar Mo. 526. 



65th Congress, 
2d Session. 



SENATE. 



i Report 

I No. 574. 



RETIREMENT OF CLASSIx^IED CIVIL SERVICE 
EMPLOYEES. 



>y 1 

nisiiSiSlffi! 



September 23, 1918. — Ordered to be printed. 



AY. McKellar, from the ^Committee on Civil Service and Retrench- 
ment,- submitted the following . 



i.17 



EEPORT. 

[To accompany S. 4637.] 



Your Committee on Civil Service and Retrenchment reports 
il Senate bill 4637 to the Senate, with the recommendation that the 
|| bill be passed. 

ill epitome OF PROVISIONS BY SECTIONS. 

• Section 1 of the bill provides that all the classified civil-service 

inployees of the United States who have on July 1, 1919, reached 
]ie age of 68 years shall be eligible for retirement on an annuity 

ith the proviso that mechanics, city and rural letter carriers and 
railway mail clerks shall be eligible for retirement when they reach 
the age of 65. Postmasters are not included in the bill. 

Section 2 of the bill first classifies the retired employees and then 
fixes the compensation of each. There are four classes, A, B, C, 
and D. 

Class A includes alj emjDloyees who have served for a total period 
of 30 years or more; class B, all those who have served more than 
25 years and less than 30 years; class C, all those who have served 
more than 20 j^ears or less than 25 years, and class D, all those who 
have served more than 15 years or less than 20 years. 

Class A is given a retirement compensation of not exceeding $600 
per annum; class B, not exceeding $540 per annum; class C, $480 per 
annum; and class D, $420 per annum. 

Section 3 has simply to do with the method of computing service, 
with the proviso that any person who receives a pension on account 
of disability incurred in the line of duty has his election to say which 
pension he will receive, but can not receive both. 

Section 4 has to do with the inclusion of the employees of the 
Library of Congress and the Botanic Garden, and giving the President 
authority upon the recommendation of Civil Service Commission to 
extend the provisions of the act to other classes of employees, and 
also to exclude intermittent employees. 



2 EETIREMENT OF CLASSIFIED CIVIL SERVICE EMPLOYEES. 

Section 5 provides for the automatic separation from the service 
upon arriving at the age of retirement, except in certain cases men- 
tioned in this section, but providing absolutely that at the end of 
10 years no employees shall be continued in the civil service of the 
United States for a period of more than 4 years beyond the age of 
retirement. 

Section 6 furnishes the regulations under which an employee shall 
apply to the Bureau of War Risk Insurance for his retirement and 
annuity. 

Section 7 simply provides that when a person applies for employ- 
ment or continues in the civil service after the passage of this act, 
he shall thereby agree that the deductions provided in the act may 
be made from his salary, notwithstanding any other statutes that 
may have been passed. 

Section 8 provides that 2^ per cent of each employee's salary shall 
be deducted and withheld from the basic salary, pay, or compensa- 
tion of each person to whom the act applies. The section further 
provides that these deductions shall be placed to the credit of a 
special fund to be known as the "Civil-service retirement fund" in 
the Treasury Department and that they shall be credited, together 
with interest thereon at 4 per cent compounded annually. This sec- 
tion also appropriates, out of any moneys in the Treasury not other- 
wise appropriated, a sum which, when added to the deductions pro- 
vided for in the bill, shall be sufficient to make payments provided 
by the act. The proviso of this section authorizes the Secretary of 
the Treasury to invest the fund in interest-bearing securities. The 
Secretary of the Treasur}^ is also empowered to invest any donations 
gifts, legacies, bequests, and the like for the benefits of the fund. 

Section 9 provides for the mailing of the checks to the annuitants, 
and that when any annuitant is under a legal disability then it may 
be paid to the duly appointed guardian. 

Section 10 simply provides the terms upon wnich credit for past 
service may be given in case of transfer or reinstatement. 

Section 11 provides that employees who transfer from classified 
service to the unclassified, or become absolutely separated from the 
service before reaching the age of retirement, shall have the amount 
of the deductions from salary returned to him or her, together with 
4 per cent interest, compounded annually. 

Section 12 provides that the administrative duties required by the 
bill are imposed upon the Director of .the Bureau of War Risk In- 
surance. 

Section 13 merely provides a proper method of paying the annui- 
ties so that the Government may be fully protected. 

Section 14 requires the heads of buieaus and departments to report 
to the Bureau of War Risk -Insurance the name and grade of each 
employee who may have been at any time upon the nonpay status. 
The War Risk Insurance Bureau is required to keep a record of ap- 
pointments, transfers, changes in grade, separations from the service, 
and losses of pay and the like. 

Section 15 provides that the Secretary of the Treasmy shall keep 
all needful tables, records, and accounts required for carrying out the 
provisions of this act, including data showing the mortality experi- 
ence of the officers and employees and the rate of withdrawal from 
such service and the like and he shaU, make a detailed comparative 
report annually to Congress. ^» ©^ D,. 



^X* 4i ^ETIREMEis i' OF CLASSIFIED CIVIL SERVICE EMPLOYEES. 3 

"^ Section 16 provides that none of the moneys mentioned in this act 
shall be assignable in law or equit}^ and that they shall not be subject 
to execution, levy or attachment, garnishment, or other legal process. 

Section 17 appropriates the sum of $100,000 for the purpose of 
carrying out the provisions of the act. 

Section 18 repeals all laws in conflict with the act. 

ELABORATE HEARINGS HAD. 

Hearings on this legislation were begun in July, 1917, by your 
committee. A great number of witnesses were examined. Repre- 
sentatives of all the civil-service associations in thp various depart- 
ments were present and examined. The committee also examined 
members of the Civil Service Commission. Members of the Cabinet 
were invited to appear before the committee and the representatives 
of some of them did appear. Hon. James L. Wilmeth, representing 
the Secretary of the Treasury, appeared. Hon. Edwin F. Sweet, 
Assistant Secretary of Commerce, represented that department. 
Gen. Henry P. McCain, Adjutant General of the Army, represented 
the War Department, and Mr. Pickens Neagle, card clerk of the 
Navy Department, and all of these gentlemen testified to the very 
great desirability of retirement legislation. They believed that the 
Government would be fully repaid for the expenditure of its portion 
of the retired pay by reason of increased efficiency in service brought 
about by the retirement of superannuated employees who are phys- 
ically and mentally able to do but little work, and putting in their 
places young and vigorous emplo3^ees who could do so much more 
work. 

Your comr.iittee is of the firmx opinion that the efficiency of the 
Government service will be greatly increased by the passage of a 
just retirement law. 

HISTORY OF RETIREMENT LEGISLATION. 

Civil-service retirement legislation has been proposed many times 
during a period of many j^ears. As a rule the employees have for 
the most part contended that the Government should pay the entire 
cost of retired pay to superannuated employees. On the other hand, 
many have contended that the employees should themselves bear 
the entire expense. Among these were Mr. Richard Henry Dana, 
president of the Civil Service Reform League of the United States. 
Mr. Dana appeared before our committee and strongly urged that 
view. . 

Bills have been from time to time introduced presenting these 
different views and some bills have been introduced presenting a 
mixture of views. Before the present bill was introduced on June 
3,1918, your committee had from time to time many conferences with 
the representatives of the employees and with Dr. Maddrill, repre- 
seriting the Government in the capacity of secretary of the Bureau 
of Efficiency. Early in these negotiations it developed that the 
employees were wiffing to have a bill passed providing that 2 per cent 
of their salaries should be deducted each month for the purpose of 
aiding the Government in paying the annuities to be provided — their 
claim being that it would not take more than 4 per cent of their salaries 
to pay all the annuities that they were willing to receive and that the 
Government should bear half. 



4 EETIREMENT OF CLASSIFIED CIVIL SEEVICE EMPLOYEES. 

HISTORY OF THIS BILL. 

Thereupon your committee submitted an outline of a proposed 
measure along the lines of a bill introduced by Senator Wadsworth 
to Dr. Maddrill of the Bureau of Efficiency, and he was asked to furnish 
the figures as to the cost. At that time the proposed bill provided 
that mechanics, railway mail clerks, and city and rural carriers should 
be retired at 62 years of age and all other clerks should be retired at 65 
years of age. The bill provided also retirement pay in four classes: 
A, at S600; B, at $540; C, at $480; and D, at $420, all maximum. 
After a careful and painstaking examination, for v/hich Dr. Maddrill 
deserves the highest credit, he reported that it would take 7 per cent 
of the salaries of the employees to pay these annuities. After this 
report of Dr. Maddrill, the representatives of the employees were 
brought together for a conference before your committee, and the 
chairman of the committee stated to them that in the light of these 
figures the bill then under consideration could not get the approval 
of the committee, but that Dr. Maddrill believed that if the age 
limits were increased to 65 years for mechanics, railway mail clerks, 
and city and rural carriers, and to 68 years for all others, and with 
certain other amendments that he suggested, the cost could be cut 
down to 5 per ce2it. 

Thereupon t]ie chairman of the committee stated to the represen- 
tatives of the employees that if they would agree to the changes in 
the bill suggested by Dr. Maddrill, and would also agree to pay one- 
half of the estimated cost of the system, that he believed that the 
committee would report the bill. A number of conferences were held 
and finally Dr. Madchill reported that the present bill, which was 
introduced on June 3, 1918, would cost the Government and the 
employees not more than about the sum of 5 per cent of the salaries 
of all the employees. 

Thereupon the employees agreed to pay the 2-h per cent of their 
salaries, the Government to bear the expense of the other estimated 
2-^- per cent, and the chairman of the committee introduced the 
present bill on that basis. 

HISTORY OF RETIREMENT SYSTEMS GENERALLY. 

The proof disclosed thiat every civilized nation, except the United 
States and Turkey Cif Turkey can be called civilized) has established 
in some way a retirement system. The first retirement system, 
<,,rude though it was, was established by Great Britain in July, 1834, 
during the reign of King William IV, nearly 90 3^ears ago. Amend- 
ments have been made to the English act from time to time ever 
since. So far as we can ascertain, Massa(;husetts is the onlj State 
that lias provided for noncontiibutory annuities paid to superannu- 
ated employees. Se^^eral municipalities in that State also pay super- 
annuated employees and a number of municipalities in other States. 
A large number of corporations also have superannuated pay systems.- 
A few of them require contributions by employees, but the most of 
them pay the annuities themselves. Among them are Armour & Co., 
United States Steel Corporation, International Harvester Co., Chi- 
cago & Northwestern Railroad Co., Atchison, Topeka & Santa Fe 
Railroad Co., Canadian Pacific Railroad Co., Baltimore & Ohio Rail- 
road Co., Delaware, Lackawana & Western Railroad Co., Grand 
Trunk Railroad Co., Illinois Central Railroad Co., Michigan Central 



EETIREMENT OP CLASSIFIED CIVIL SERVICE EMPLOYEES. 5 

Railroad Co.. Minneapolis, St. Paul &. Sault Ste. Marie Railroad Co.. 
New York-Central Railroad Co., Rock Island S< Pacific Railroad Co., 
and otliers. The ages in these companies are from 65 to 70 years. 
New York City : San Francisco, Cal. ; Takoma, Wash.; Cleveland, 
Ohio; Detroit, Mich, : Pittsburgh, Pa., and perhaps some other cities 
provide for pensions to superannuated employees. 

In the United States retirement allowances in the form of age 
retirement annuities are made to Federal judges, the employees of 
the Army, Navy, and Marine Corps, the Life-Saving and Lighthouse 
Service, and the Revenue Service. 

BOTH POLITICAL PARTIES COMMITTED T(5 IT. 

The Republican platform of 1912 contained a provision on this 
subject as follows: 

We favor legislation to make possible the equitable retirement of disabled and 
superannuated members of the civil service in order that a higher standard of efficiency 
may be maintained. 

The Diemocratic platform at St. Louis in 1916 contained a pro- 
vision on this subject as follows: 

An equitable retirement law providing for the retirement of superannuated and 
disabled employees of the civil service, to the end that a higher standard of efficiency 
may be maintained. 

HALF AND HALF SYSTEM. 

For a number of years the Secretarj^ of the Interior, the Post- 
master General, and the State and other departments have declared 
in favor of a retirement system in their several reports. 

The system provided in this bill is based on the half-and-half plan — 
the Government bearing one half of the expense and the employees 
the other half. The Government is safeguarded by the fact that its 
expert representatives have produced the figures relative to the cost. 
It is further safeguarded by the provisions requiring all employees to 
agree to it who work for the Government in the classified service. It 
is not burdensome on the employees and it is not burdensome on the 
Government. It makes the employees more saving and virtually 
provides that they shall lay by annuities for themselves. At the 
same time, the Government encourages them in this good work. 
On the other hand, the Government gets, as we believe, the full value 
of its contribution by reason of a greater increase in efficiency in the 
civil service. There are now probably about 7,457 superanuated 
employees (4,104 then had sufficient service to retire.) For the most 
part they are drawing the highest rates of pay, having been in the 
service so long. They are doing for the most part the least efficient 
service because of their age. In the event this bill passes their places 
will be taken by young employees at lower rates of pay, another sav- 
ing to the Government, and in some cases they do no work at all. 
There is now no way of the Government's discharging its superannu- 
ated employees by law, and it is believed that by this retirement sys- 
tem that the Government will save in increased efficiency in service 
every dollar that it pays as its share of the annuities. 

DETAILS OF COST OF SYSTEM. 

Your committee desires to call attention to the cost of the system 
as estimated by Dr. Maddrill and contained in the hearings. 



RETIREMENT OF CLASSIEIED CIVIL SERVICE EMPLOYEES. 





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EETIEEMEFT OP CLASSIFIED CIVIL SERVICE EMPLOYEES. 7 

DOES NOT IMPOSE ADDITIONAL BURDEN DURING THE WAR. 

A question has been raised about the advisabihty of putting an 
additional financial bui'den on the Government during the war. 
Your committee respectfully reports that while virtually there will 
be placed upon the Government an additional burden equal to a 
flat raise of 2^ per cent on all civil service employees' salaries, still 
that in so far as putting an additional burden on the Government 
during the war is concerned, the bill, if passed, will aid the Govern- 
ment financially, in that the deductions from salaries will be largely 
in excess of the annuities paid out. 

For instance, tne estimated receipts from employees during the 
year 1920 will be $9,000,000. The annuities paid out will not be 
much over $2,000,000 and there will be an excess the first year of 
$6,900,000 and for a number of years the receipts will exceed the 
amounts paid out. This is shown by a statement made by Dr. Mad- 
drill, marked 'Exhibit C" to his testimony in the hearing, which 
is here copied. 

[McKellar-Keating bill (S. 4637, H. R. 123.52).] 



Fiscal year ending July 1. 


Receipts in 
the form of 
deduction. 


Disbursements 
upon with- 
drawals prior 
to pension age. 


Pensions and 
guaranteed 
returns to 
pensioners. 


Excess. 


1920 . . 


S9, 000, 000 
9,400,000 
9.-500,000 
9,600.000 
9, 700, 000 
9, 770, 000 


S400,000 
865, 000 
1,340,000 
1,840,000 
2, 360, 000 
'2, 910, 000 


$1,7,32,000 
1,972,000 
2,1.54,000 
2,400,000 
2,589,000 
2, 778, 000 


S8, 900, 000 


1921 


6, .55", 000 


1922 . . 


6, 000, 000 


1923 


.5, .3.50, 000 


1024 


4, 750, 000 


1925 


1,100,000 







COST OF GUARANTIES AND ANNUITIES BY YEARS. 

The cost of pensions and guarantees is shown in the following 
tables submitted by Dr. Maddrill as Exhibit D. 



Exhibit D. — Cost of pensions and guarantees. 
[McKellar-Keating bill (S. 4637, H. R. 12352).] 





Retiring July 1, 1919 (assuming 
bill will become efiective then). 


Retiring annually thereafter. 




Ficsal 

year 

ending 

July 1- 


1,344 

mechanics, 

carriers, 

and 
railway 
postal, 
clerks, 


3,232 
others. 


4,576 
ci\al em- 
ployees. 


Mechanics, 
carriers, etc. 


others. 


Civil em- 
ployees. 


Combined 
cost by 
years. 


Num- 
ber. 


Cost. 


Num- 
ber. 


Cost. 


Num- 
ber. 


Cost. 




1920 


$549, 200 
510, 000 
471, 100 
432, 600 
394, 700 
375, 600 
321, 500 
286.800 
253; 800 
222,500 


$1,183,300 
1,081,000 
980. 700 
883, 300 
790, 000 
700,000 
614, 500 
534,500 
460,000 
391, 400 


$1,732,500 

1,501,000 

1, 451, 800 

1,315,900 

1,184,700 

1,075,600 

936, 000 

821, 300 

713,800 

613, 900 














$1,732,000 


1921 

1922..... 

1923 

1924 

1925 

1926 

1927 

1928 

1929 


331 
340 
349 
358, 
367 
376 
386 
396 
406 


$137. 100 
226, 900 
388,900 
503, 100 
608,700 
710, 200 
807,600 
901, 000 
990, 100 


581 
605 
630 
657 
£84 
712 
742 
773 
805 


$243, 800 

475,300 

695, 400 

901, 200 

1,093,500 

1, 273, 400 

1,448,500 

1,618,800 

1,784,500 


912 
945 
979 
1,015 
1,051 
1,088 
1,128 
1,169 
1,211 


$380,966 
702, 200 
1,084,300 
1,4C4,300 
1,702,200 
1,983,600 
2,2.56,100 
2,519,800 
2,774,600 


1,972,000 
2, 154, 000 
2,400,000 
2,589,000 
2,778,000 
2. 920. 000 
3.077,000 
3', 234. 000 
3,388,000 



8 EETIEEMEJSTT OF CLASSIFIED CIVIL SERVICE EMPLOYEES. ||:;ji 

From these figures it is plainly evident that for at least a period of pH 

10 years there will be no additional burden upon the Government, i!;;! 

Of course, howevei, the amount that the Government pays will be lili 

OTadually increased until the time arrives when it will be paying its |jp::! 
full share of the annuities. 

mi. MADivRII.L's PROPOSED AMENDMENT. 

After the draft of the bill had been agreed upon and the bill intro- 
duced, Dr. Maddrill, who has given this subject the greatest study 
and whose opinions are most valuable, asked for permission to reap- 
pear before the committee and submit an amendment. This was 
done and he submitted several amendments with a great many 
figures which are found in the hearings. 

The principal change suggested by Dr. Maddrill is in that section 
of the bill fixing the amounts of retirement pay. Dr. Maddrill 
states that those fixed under the present bill are not actuarily perfect, 
but that those fixed in his amendment iire. While Dr. Maddrill 
doubtless may be correct in this matter, still the payments provided 
for in his amendment would be understood with difficulty by the 
employees and, in the judgment of your committee, the figures 
adopted in the present bill bein^ simple, plain and unequivocal, and 
easily understood, are preferable. 

Your committee therefore has seen fit to reject Dr. Maddrill's 
amendment. Kepresentatives of the various em.ployees' associations 
were called before the committee when Dr. Maddrill testified and 
were told about the inequalities, or seeming inequalities, of the rates 
established in the present bill. They were unanimously of the 
opinion that notwithstanding these inequalities they preferred the 
bill as it is. Several members of the committee, while voting to 
report the bill, reserved the right to offer amendments, and to vote 
against the bill if these amendments were not adopted. 

Youi' committee respectfully reports the bill without amendment, 
with a recommendation that the Senate pass the same. 



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